Homework Help is Here – Start Your Trial Now!
Business
Finance
Years to maturity: Bond A= 5 years  Bond B =10 years Coupon rate: Bond A =5% Bond B =5% Par value: Bond A =1000 Bond B =1000 Yield to maturity: Bond A =8% Bond B = 6% Par amount owned: Bond A = R3,45 million Bond B= R2 million Market  value: Bond A = R30367.59(in 100's) Bond B = R18528 ( in 100's) Required: Without doing any calculations,which Bond would have a higher duration  Assuming that Bond A is an option free Bond, calculate the bond's modified duration using the Macauly's duration Assume that the duration of Bond A and B is 4.2 and 7.5 respectively, determine the duration of the portfolio

Years to maturity: Bond A= 5 years  Bond B =10 years Coupon rate: Bond A =5% Bond B =5% Par value: Bond A =1000 Bond B =1000 Yield to maturity: Bond A =8% Bond B = 6% Par amount owned: Bond A = R3,45 million Bond B= R2 million Market  value: Bond A = R30367.59(in 100's) Bond B = R18528 ( in 100's) Required: Without doing any calculations,which Bond would have a higher duration  Assuming that Bond A is an option free Bond, calculate the bond's modified duration using the Macauly's duration Assume that the duration of Bond A and B is 4.2 and 7.5 respectively, determine the duration of the portfolio

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
See similar textbooks
icon
Related questions
Question

Years to maturity: Bond A= 5 years  Bond B =10 years

Coupon rate: Bond A =5% Bond B =5%

Par value: Bond A =1000 Bond B =1000

Yield to maturity: Bond A =8% Bond B = 6%

Par amount owned: Bond A = R3,45 million Bond B= R2 million

Market  value: Bond A = R30367.59(in 100's) Bond B = R18528 ( in 100's)

Required:

Without doing any calculations,which Bond would have a higher duration 

Assuming that Bond A is an option free Bond, calculate the bond's modified duration using the Macauly's duration

Assume that the duration of Bond A and B is 4.2 and 7.5 respectively, determine the duration of the portfolio 

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps with 5 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Types Of Bonds
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS